The Biology of M&A

University essay from Lunds universitet/Företagsekonomiska institutionen

Abstract: Purpose: The purpose of this paper is to investigate and explore how personality traits of CEO’s affect the strategic decision of acquiring another company and whether the performance of the acquisition is affected by the examined traits. Methodology: The study follows a quantitative approach with a hypothetical deductive method. The data is primarily retrieved from transcribed earnings calls and statistical regression analysis is used for the event study where stated hypotheses are tested. Theoretical perspectives: The theoretical perspective is based on theory and previous research related to M&A value creation, traditional corporate finance as well as theories incorporating behavioral theory and theory from psychology. Empirical foundation: The sample used in the study consists of 99 public acquisitions in the US market, announced between April 2010 and February 2020. Data is obtained from Zephyr, Yahoo Finance, and Seeking Alpha. Conclusions: The personality trait extraversion shows a significant negative relationship on M&A-intensity while neuroticism shows a significant positive relationship. The event study provided a significant result that the acquiring firm had a negative abnormal return of -1.2% on one month period and -2.0% on a two month period. As for the personality traits influence on performance no significant results were yielded, there were indications that neuroticism had a positive effect on performance, but as mentioned, not significant

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